- 1). Obtain your amortization schedule within your loan documents. Get the loan amount, the periodic interest rate and the monthly payment amount from the amortization table. You will need these to calculate your mortgage interest amortization.
- 2). Multiply the loan amount by your periodic interest rate, as this will be the amount of interest paid in your monthly payment. There is an inverse relationship here between interest and principal. Larger interest payments means less equity growth, while larger principal payments means more equity growth. This is why equity is harder to build in the beginning at easier to build at the end of a loan.
- 3). Take your monthly payment amount and subtract from it the interest payment. The remainder of the monthly amount is what will go towards your principal balance (the loan amount).
- 4). Subtract the principal payment amount from the loan amount. Repeat steps two through 3 to determine the interest and principal payout for your next monthly payment.
- 5). Consider making extra principal payments whenever you can. Your amortization schedule should have a sample table demonstrating the effectiveness of just one extra loan payment made a year; you take off years off your mortgage term and in the process save a lot of money from decreasing your interest paid out.
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